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The government has announced a major overhaul of the pensions system which could see every pensioner in the UK receiving £140 per week.
In a speech at Age UK's annual conference, work and pensions secretary Iain Duncan Smith said the coalition is to embark on a fundamental overhaul of the benefits system to ensure that it "pays to save for retirement".
Duncan Smith signalled a move towards a flat-rate state pension that would remove disincentives for lower earners to build up savings.
The changes would also benefit women who fail to qualify for a full state pension because they take time off work to bring up a family.
The work and pensions secretary argued that pensions require the same kind of simplification that will brought to plans for a universal benefit for people of working age.
He warned that younger workers are becoming "increasingly cynical" about saving and will not be able to afford a stable retirement unless the government does "something radically different".
"Auto-enrolment cannot solve the savings challenge on its own, and we have to be prepared to look at the other side of the equation. We now have to look at the state pension," he said.
"The state pension system is so complex that most people have no idea what it will mean for them now and in their retirement.
"And too many people on low incomes who do the right thing in saving for their retirement find those savings clawed back through means-testing.
"We have to change this. We have to send out a clear message across both the welfare and pension systems: you will be better off in work than on benefits, and you will be better off in retirement if you save."
Charity director for Age UK, Michelle Mitchell, welcomed his plan, saying: "Sweeping simplification of the state pension system is needed so that everyone can expect a decent, flat-rate pension."
However, a report from Age UK suggests vulnerable pensioners face a "bleak 2011" due to NHS ring-fencing and cuts to social care.
The "Agenda for Later Life 2011" report says that despite the coalition's appetite for "radical, long-term thinking", ministers are yet to tackle the strategic, cross-cutting issues facing the UK's ageing society.
According to a poll, which sampled 2,046 people over 18 years of age, 60 per cent said they believed government cuts have left the country less prepared for an ageing population.
Article Comments
What is to happen to elderly people (80 +) who have spent a great deal of their lives in caring for relatives? They are now disabled theselves, but still caring. Are any benefits such as disability allowance to continue has that been transferred to make up the increased pension?
Pat Cull
8th Mar 2011 at 12:06 pm
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